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The Internal Revenue Service (IRS) recently issued its luxury car depreciation limits for business vehicles placed in service in 2021 as well as its lease inclusion amounts for business vehicles with leases beginning in 2021. Doeren Mayhew’s business tax advisors share the new amounts so you can be informed in your next purchase or lease.
The depreciation caps for a luxury passenger car placed in service in 2021 are:
The depreciation caps for a luxury SUV, truck or van placed in service in 2021 are:
If depreciation is greater than the annual cap, the excess depreciation will be deducted starting in the year following the end of the vehicle’s regular depreciation period. The annual cap for excess depreciation is $5,860 for passenger cars, SUVs, trucks and vans.
If a vehicle’s lease began in 2021, the taxpayer is required to add a lease inclusion amount to their gross income each year of the lease if its fair market value at the time of the lease is greater than $51,000 for a passenger car, SUV, truck or van. A taxpayer’s lease inclusion amount results in a permanent reduction in their deduction for lease payments. For more information on the lease inclusion amounts for each year of a lease, please see the 2021 lease inclusion tables.
Certain vehicles are exempt from the depreciation caps and lease inclusion amounts, including:
Taxpayers looking to avoid these limits should opt for a larger vehicle.
If you’re looking to purchase or lease a new business vehicle and have questions about the tax implications, contact Doeren Mayhew’s CPAs and advisors today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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